On April 9, 2020, the Federal Reserve committed $2.3 trillion to the U.S. economy in response to the ongoing COVID-19 pandemic. One of the major programs funded by this unprecedented commitment by the Federal Reserve is the Main Street Lending Program (MSLP), which will begin lending up to $600 billion to U.S.-based businesses in the coming weeks. The appropriation of funds for the MSLP was authorized pursuant to Section 4027 of the CARES Act, the comment period on the initial terms and requirements of the MSLP loans closed on April 16, 2020, and the final rules were released on April 30, 2020. A summary of the terms of the MSLP is as follows:

 

 

An Eligible Borrower for the MSLP is a business organized or created in the United States prior to March 13, 2020, that has 15,000 employees or less, or had $5 billion or less in revenue in 2019. The SBA’s affiliation rules will apply to potential borrowers for the MSLP. Further, through guidance from the Federal Reserve, a borrower must be able to demonstrate that they were in good financial shape prior to the COVID-19 pandemic in order to qualify for the MSLP. 

 

An Eligible Lender is any U.S. insured depository institution, U.S. bank holding company, or U.S. savings and loan holding company. This differs from the Payroll Protection Program (PPP) as only SBA-approved lenders could lend under that program. 

 

The overall MSLP has three separate loans available for borrowers: the MSNLF (the “New Loan”), the MSPLF (the “Priority Loan”), and the MSELF (the “Extended Loan”). A borrower may only participate in one of the three programs.

 

All three MSLP loans will have the following terms for borrowers:

 

For the New Loan and the Priority Loan, the loan amount will be between $500,000 and $25 million, with the maximum amount being the lesser of:

 

 

For the Extended Loan, the loan amount will be between $10 million and $200 million, with the maximum amount being the lesser of:

 

The lender must use the same methodology it has used to calculate adjusted EBITDA as it previously has used when extending credit to the borrower or similarly situated borrowers on or before April 24, 2020.

 

The $500,000 floor for the New and Priority Loans, and the $10 million floor for the Extended Loan, are the minimum amounts that can be borrowed per those programs. Therefore, if the maximum loan amount you are eligible for is less than $500,000 for the New and Priority Loans, or $10 million for the Extended Loan, you will be unable to utilize the MSLP.

 

The program will close on September 30, 2020.

 

 

The MSLP loans, depending on which program the borrower utilizes, have differing repayment terms. The principal on the New Loan will amortize by one-third in each of years two (2) through four (4) of the loan. The principal on the Priority and Extended Loans will amortize fifteen (15) percent in years two (2) and three (3), with a balloon payment of seventy (70) percent due in year four (4).

 

If a borrower receives an MSLP loan, there are additional requirements they must abide by, including:

 

 

Yes. Recipients of PPP loan proceeds are not precluded from applying for an MSLP loan. However, the MSLP loan is separate and distinct from the PPP loan, and any amounts approved and disbursed under the MSLP will not be eligible for forgiveness. Any PPP loan amounts disbursed will still be eligible for forgiveness. 

 

The comment period for the MSLP ended on April 16, 2020, and the Federal Reserve released the final rules for the loan programs on April 30, 2020. Please contact your individual lender to determine their timeframe and process for participating in the MSLP.